Wells Fargo Says It Worked for Mortgage-Market Share

By Dakin Campbell -
Aug 22, 2012

Wells Fargo & Co. (WFC), the largest U.S.
home lender, said competition in the mortgage market is
“essential” and that its control of 1 in 3 U.S. mortgages is
the result of doing a better job than rivals.

Growth in market share isn’t “magic” and is driven by
clients choosing the bank over competitors because it has served
them well, San Francisco-based Wells Fargo said in a memo sent
last week to mortgage employees. The bank said it issued the
two-page, unsigned document amid “discussion about Wells
Fargo’s prominence” in the market. The document was confirmed
by Tom Goyda, a bank spokesman.

“In a free economy, competition is essential,” the bank
said. “We believe customers must have choices in where they
bring their lending business.”

Regulators and lawmakers have said that Wells Fargo’s
control of mortgage lending and servicing could hurt consumers
and undermine markets. A setback for the bank or a strategy
shift could choke off credit for homebuyers, said David Stevens,
chief executive officer at the Mortgage Bankers Association and
a former official in the U.S. Department of Housing and Urban
Development.

“The nation benefits from a broadly distributed mortgage-
finance system,” Stevens said in an interview this year.

Wells Fargo, run by CEO John Stumpf, 58, controlled 33.1
percent of the origination market through the first six months
of the year, according to Inside Mortgage Finance, an industry
publication. In mortgage servicing, which involves billing and
collections, Wells Fargo is also No. 1, with 18.5 percent.

Warnings Issued

Wells Fargo’s share drew warnings from the inspector
general for Fannie Mae and Freddie Mac, the head of Ginnie Mae,
Fitch Ratings, and congressmen including one from the bank’s
home state.

“Market share for us is not a goal, it’s not the be-all,
end-all that we strive for,” Mike Heid, chief of the bank’s
mortgage business, said May 22 at the company’s investor day in
New York.

Wells Fargo’s stance, reiterated in the memo, is that it
does a better job than rivals and benefits as companies scale
back or exit the business and as market conditions discourage
newcomers.

“Serving customers very well means that more customers and
clients choose us and reward us with their business,” the bank
said in the memo. “Doing this better than any other home lender
gets measured as market-share growth.”

Informing Employees

Goyda said the memo is an example of communications sent
regularly to Wells Fargo employees.

“We believe it’s important for team members to be informed
and educated about market and business developments,” he said
yesterday in a phone interview.

Wells Fargo managers in the San Francisco Bay Area at a
January sales event urged retail loan officers to reach for 40
percent of the new-home purchase market, according to two
attendees who asked that their names not be used because they
weren’t authorized to speak publicly. Some of the managers
dressed as cowboys, six shooters strapped to their hips.

The bank has funded 6.4 million mortgages in the 3 1/2
years since the housing crisis began, the document shows. It
originated $131 billion in mortgages in the second quarter,
leading to a record $2.89 billion in mortgage-banking income.

“As time goes on, market share may go up or down,” Wells
Fargo said in the memo. “But whatever the environment, our
focus will be the same.”